Class Action and Product Insights for Your Business
September 14, 2012 - False Advertising, Consumer Products

Strategies and Defenses for Retailers Named in Consumer Class Actions

Are retailers at risk in private surgeon general class actions?  Often, their only conduct is putting a product on the shelf.  They haven’t designed the product, much less had any input on the product labels or advertising.  Yet, time after time, retailers are named as defendants in false advertising class actions.  Private surgeon generals often treat manufacturers and retailers as one and the same in their complaints, pleading blanket allegations of negligence, strict liability, breach of implied and express warranties, and violations of various state consumer protection statutes.  To date, there isn’t any kryptonite to keep these lawsuits away, but there are a few tactics to keep them at bay.

No Vicarious LiabilityMove to dismiss or move for summary judgment on the grounds that a retailer does not advertise a product merely by selling it, and cannot be held vicariously liable for false advertising.  See, e.g., Perfect 10, Inc. v. Visa Int’l Serv. Ass’n, 494 F.3d 788, 792 (9th Cir. 2007) (“[U]nfair practices claim[s] . . . cannot be predicated on vicarious liability.  A defendant’s liability must be based on his personal participation in the unlawful practices and unbridled control over the [alleged offending] practices[.]”) (citing Emery v. Visa Int’l Serv. Ass’n, 95 Cal. App. 4th 952, 964 (2002) (“[E]ven if [the defendant] allowed [use] of its logo, trade name, or trademark, it would not be liable for false advertising.  There is no duty to investigate the truth of statements made by others.”)).

Seller’s ExceptionAssert the so-called “Seller’s Exception” available in a number of states, which expressly excludes non-manufacturing sellers from strict liability resulting from harm alleged to have been caused by a product.  Illinois (735 ILCS 5/2-621), Georgia (O.C.G.A. 51-1-11.1), Indiana (Indiana Code section 34-20-2-3), and New Jersey (N.J.S.A. 2A:58C-9) are but a few of the states that shield sellers from strict product liability.

California’s Sherman Act: Assert California’s Sherman Act to defeat liability under California’s UCL and other state unfair competition statutes.  California’s UCL cannot be used to impose liability on a seller who is expressly excluded from liability by another statute, see Hobby Industry Assoc. of America v. Younger, 101 Cal. App. 3d 358, 369-71 (1980), and California’s Sherman Food, Drug, and Cosmetic Act, Cal. Health & Safety Code § 110245, does just that (“Immunity of Dealers from Prosecution”) (excepting sellers from liability for the sale of an adulterated or misbranded product where certain circumstances are met).

Federal Food, Drug, and Cosmetic Act: Assert the federal Food, Drug, and Cosmetic Act to defeat liability under California’s UCL, and other state unfair competition statutes.  See 21 U.S.C. § 333(c)(1)-(2) (“Exception in Certain Cases of Good Faith”) (excepting sellers from liability for the selling of an adulterated or misbranded product under certain circumstances).